Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases...


Warnerwoods Company uses a perpetual inventory system. It entered into the following purchases and sales transactions for March.

DateActivitiesUnits Acquired at CostUnits Sold at Retails
Mar. 1 Beginning inventory 100 units @ $50.00 per unit
Mar. 5 Purchase 400 units @ $55.00 per unit
Mar. 9 Sales 420 units @ $85.00 per unit
Mar. 18 Purchase 120 units @ $60.00 per unit
Mar. 25 Purchase 200 units @ $62.00 per unit
Mar. 29 Sales 160 units @ $95.00 per unit
Totals 820 units 580 units

Compute gross profit earned by the company for each of the four costing methods. For specific identification, the March 9 sale consisted of 80 units from beginning inventory and 340 units from the March 5 purchase; the March 29 sale consisted of 40 units from the March 18 purchase and 120 units from the March 25 purchase.

Gross MarginFIFO LIFO Avg. Cost Spec. ID
Less: Cost of goods sold
Gross profit

Perpetual Inventory System:

Perpetual inventory system monitors the balance of inventory through recording inventory related transactions to the inventory accounts. At the same time, a cost of goods sold is also also maintained everytime a sale is being made. Although physical count is not yet being done, the cost of goods sold can already be monitored.

Answer and Explanation: 1

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DateQuantitySelling PriceTotal
March 94208535,700
March 291609515,200
Total Sales580-50,900


DateQuantitySelling PriceTotal
March 1100505,000

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Perpetual Inventory System: Definition, Advantages & Examples


Chapter 1 / Lesson 15

Perpetual inventory systems are used by businesses to monitor their inventories in real-time with the use of radio frequency identification, barcodes, point of sales, and other technological systems. Learn about the definition of a perpetual inventory system, the advantages of using this system, and some examples of perpetual inventory systems.

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